Dollar General Corp. (NYSE:DG)

Over the observed period, net operating profit after taxes (NOPAT) generally increased, though a recent decline is apparent. Invested capital consistently rose throughout the period, while the cost of capital fluctuated modestly. Consequently, economic profit exhibited a positive trend for most of the period, peaking in 2023 before decreasing in the most recent year.

NOPAT Trend

NOPAT increased from US$1,981,150 thousand in 2019 to US$2,145,885 thousand in 2020, representing a growth of approximately 8.3%. A significant increase was then observed, with NOPAT reaching US$3,105,494 thousand in 2021, and further increasing to US$3,112,907 thousand in 2022. However, a substantial decrease occurred in 2024, with NOPAT falling to US$2,431,523 thousand. This represents the lowest NOPAT value within the observed timeframe.

Cost of Capital

The cost of capital experienced a slight increase from 7.91% in 2019 to 8.27% in 2022. It then decreased to 7.53% in 2024, representing the lowest value observed. These fluctuations were relatively small compared to the changes in NOPAT and invested capital.

Invested Capital

Invested capital demonstrated a consistent upward trend throughout the period. It increased from US$18,107,408 thousand in 2019 to US$26,309,034 thousand in 2024. The rate of increase appeared to accelerate in later years, particularly between 2022 and 2024.

Economic Profit

Economic profit generally followed an increasing trend, mirroring the growth in NOPAT. It rose from US$549,361 thousand in 2019 to a peak of US$1,706,758 thousand in 2023. However, in 2024, economic profit decreased significantly to US$449,594 thousand, coinciding with the decline in NOPAT. Despite this decrease, economic profit remained positive throughout the entire period.

The recent decline in both NOPAT and economic profit warrants further investigation to determine the underlying causes and potential implications for future performance. The continued growth in invested capital, coupled with the decrease in NOPAT, suggests a potential decrease in the efficiency of capital utilization in the most recent period.

The annual financial data indicates notable fluctuations in the profitability metrics over the presented periods.

Net Income

Net income showed a consistent increase from February 1, 2019, through January 29, 2021, rising from approximately 1.59 billion US dollars to 2.65 billion US dollars. This upward trend indicates improved profitability during these years. However, in the subsequent years, net income declined, falling to about 2.40 billion US dollars by February 3, 2023, and further decreasing to approximately 1.66 billion US dollars by February 2, 2024. This decline in net income suggests challenges impacting profitability in the most recent years analyzed.

Net Operating Profit After Taxes (NOPAT)

NOPAT similarly displayed an upward trajectory from February 1, 2019, through February 3, 2023. It grew from approximately 1.98 billion US dollars in 2019 to a peak of about 3.66 billion US dollars in 2023. This represents significant improvement in operating efficiency and profitability over this time frame. However, in the latest period ending February 2, 2024, NOPAT declined notably to around 2.43 billion US dollars, indicating a reduction in operating profitability despite the previous gains.

Overall, both net income and NOPAT exhibited substantial growth from 2019 through early 2023, reflecting enhanced financial performance and operational effectiveness. Nevertheless, the data for the most recent year reveals a marked decrease in these key profitability indicators, implying emerging issues or external factors affecting the company’s financial returns. Close monitoring and further analysis may be required to understand the drivers behind this downturn and to assess the company's future profitability prospects.

The data reflects trends in the provision for income taxes and cash operating taxes over a six-year period, from February 2019 to February 2024. Both financial items are presented in thousands of US dollars.

Provision for Income Taxes

The provision for income taxes displayed an overall upward trend between 2019 and 2023, beginning at 425,944 thousand US dollars in 2019 and peaking at 700,625 thousand US dollars in 2023. Specifically, the amount increased steadily from 2019 through 2021, reaching a high of 749,330 thousand US dollars in 2021. After this peak, the provision declined to 663,917 thousand US dollars in 2022, then rose slightly in 2023 before substantially decreasing to 458,245 thousand US dollars in 2024. This pattern suggests variability in tax expense recognition possibly influenced by changes in taxable income or tax planning strategies.

Cash Operating Taxes

Cash operating taxes also followed an increasing trend in the initial years, starting at 457,118 thousand US dollars in 2019 and reaching 823,390 thousand US dollars in 2021. This was followed by a decline in 2022 to 660,916 thousand US dollars and continued decreases through 2023 and 2024, reaching 596,198 thousand and 553,172 thousand US dollars respectively. The decline after 2021 indicates a reduction in actual cash outflows related to income taxes, which may correspond to changes in timing differences or tax provisions to cash payments.

Comparative Insights

Notably, cash operating taxes consistently exceed the provision for income taxes through 2021 but then fall below the provision in 2023 and 2024. This shift indicates a divergence between the tax expense recorded under accrual accounting (provision) and the cash paid for taxes, potentially due to deferred tax assets/liabilities or timing differences in tax payments. The peak of cash operating taxes in 2021, which is significantly higher than both preceding and subsequent years, may reflect a one-time tax payment or adjustment.

Overall, both the provision for income taxes and cash operating taxes exhibit peaks around 2021, followed by notable declines, with cash operating taxes showing a sharper descent. The divergence observed in recent years suggests evolving tax payment patterns and provision estimates that warrant closer examination for their implications on the company's tax strategy and cash flow management.

Total Reported Debt & Leases

The total reported debt and leases exhibit a consistent upward trend over the six-year period. Beginning at approximately $11.1 billion in early 2019, the figure increased steadily each year, reaching around $18.1 billion by early 2024. This represents an overall increase of roughly 63% from 2019 to 2024, with notable acceleration in growth between 2021 and 2023.

Shareholders’ Equity

Shareholders’ equity demonstrated moderate fluctuations with a slight downward trend until 2023, followed by a recovery in 2024. Initially valued at about $6.4 billion in 2019, it increased marginally in 2020 before decreasing progressively to a low of approximately $5.5 billion in early 2023. A rebound occurred in the final year to nearly $6.7 billion, almost recovering the equity levels observed at the beginning of the period.

Invested Capital

Invested capital showed a steady increase throughout the entire period. Starting at approximately $18.1 billion in 2019, it rose gradually each year, reaching about $26.3 billion by early 2024. This constitutes an increase of approximately 45% over six years, indicating continued investment and growth in capital base. The increases are consistent and without significant volatility.

Overall Analysis

The company appears to have increased its leverage significantly, as evidenced by the growing total reported debt and leases, which outpaced the growth in shareholders’ equity. Despite a temporary decline in equity through 2023, the final year saw a recovery to prior levels. The consistent rise in invested capital alongside increasing debt suggests an expansion strategy possibly funded by borrowing. The leverage position warrants monitoring due to the growing debt level relative to equity.

The period between February 1, 2019, and February 2, 2024, demonstrates a fluctuating pattern in economic performance. Economic profit generally increased from 2019 to 2023, but experienced a substantial decrease in the most recent period. Invested capital consistently rose throughout the observed timeframe. The economic spread ratio, a key indicator of value creation, mirrored this trend initially, peaking in 2023 before declining significantly.

Economic Profit

Economic profit exhibited an upward trajectory from US$549.361 million in 2019 to US$1.706.758 million in 2023. This represents a significant increase in value generated above the cost of capital. However, a marked decrease to US$449.594 million was observed in 2024, suggesting a potential shift in profitability or increased capital costs.

Invested Capital

Invested capital consistently increased over the period, rising from US$18.107 million in 2019 to US$26.309 million in 2024. This indicates ongoing investment in the business, potentially driving growth, but also requiring higher returns to maintain economic profit levels.

Economic Spread Ratio

The economic spread ratio, which reflects the efficiency of capital allocation, increased from 3.03% in 2019 to a peak of 6.89% in 2023. This suggests improving returns relative to invested capital. However, the ratio declined sharply to 1.71% in 2024. This decrease, coupled with the reduction in economic profit, warrants further investigation to determine the underlying causes, such as increased cost of capital, decreased operational efficiency, or changes in the competitive landscape.

The substantial decline in both economic profit and the economic spread ratio in 2024 is a notable development. While invested capital continues to grow, the diminished returns suggest a potential need to reassess capital allocation strategies and operational performance to restore value creation.

The economic profit and net sales figures demonstrate a generally positive trajectory over the observed period, though recent performance indicates a shift in this trend. Economic profit increased significantly from 2019 to 2021, followed by fluctuations in subsequent years. Net sales consistently increased year-over-year until 2024.

Economic Profit

Economic profit exhibited substantial growth between 2019 and 2021, rising from US$549.361 million to US$1.405 billion. A slight decrease was noted between 2021 and 2022, with economic profit falling to US$1.335 billion. Further growth occurred in 2023, reaching US$1.707 billion, representing the highest value in the observed period. However, a significant decline was observed in 2024, with economic profit decreasing to US$449.594 million.

Net Sales

Net sales experienced consistent growth from 2019 through 2023. Sales increased from US$25.625 billion in 2019 to US$37.845 billion in 2023. The rate of growth slowed in 2024, with net sales reaching US$38.692 billion, indicating a continued, but more modest, increase.

Economic Profit Margin

The economic profit margin generally increased from 2.14% in 2019 to 4.16% in 2021, reflecting improved profitability relative to sales. The margin decreased slightly to 3.90% in 2022, before increasing to 4.51% in 2023. A substantial decrease in the economic profit margin was observed in 2024, falling to 1.16%, coinciding with the decline in economic profit despite a continued increase in net sales. This suggests a decrease in the efficiency of generating economic profit from each dollar of sales.

The recent decline in both economic profit and, particularly, the economic profit margin in 2024 warrants further investigation. While net sales continue to grow, the diminished ability to translate those sales into economic profit suggests potential challenges related to cost management, pricing strategies, or operational efficiency.